Net revenues - Net revenues for the first nine months of 2024 decreased 18% to $3,033.9 million from $3,714.4 million for the first nine months of 2023 primarily driven by a $423.5 million, or 87%, decline in the Entertainment segment and a $334.9 million, or 16%, decline in the Consumer Products segment, partially offset by a $77.9 million, or 7%, increase in the Wizards of the Coast and Digital Gaming segment. See the Segment Results discussion below for further details.
The following table presents net revenues by brand portfolio category for the nine months ended September 29, 2024 and October 1, 2023:
| | | | | | | | | | | | | | | | | |
| Nine Months Ended |
| September 29,
2024 | | October 1,
2023 | | %
Change |
| Franchise Brands | $ | 2,334.7 | | | $ | 2,412.8 | | | (3) | % |
| Partner Brands | 402.4 | | | 533.8 | | | (25) | % |
| Portfolio Brands | 296.8 | | | 370.6 | | | (20) | % |
Non-Hasbro Branded Film & TV (1) | — | | | 397.2 | | | (100) | % |
| Total | $ | 3,033.9 | | | $ | 3,714.4 | | | (18) | % |
(1) Net revenues from the Company's Non-Hasbro-branded Film and TV portfolio were associated with the Company's non-core eOne Film and TV business sold to Lionsgate during the fourth quarter of 2023.
FRANCHISE BRANDS: Net revenues in the Franchise Brands portfolio decreased $78.1 million, or 3%, in the first nine months of 2024, compared to the first nine months of 2023. The net revenue decrease primarily reflects lower net revenues from NERF and TRANSFORMERS products. Net revenues from TRANSFORMERS products in the first nine months of 2023 were supported by the June 2023 theatrical release of TRANSFORMERS: Rise of the Beasts. The lower net revenues from NERF and TRANSFORMERS products were partially offset by higher net revenues from MONOPOLY GO!, along with MAGIC: THE GATHERING products.
PARTNER BRANDS: Net revenues from the Partner Brands portfolio decreased $131.4 million, or 25%, in the first nine months of 2024, compared to the first nine months of 2023. During the first nine months of 2024, Partner Brands net revenue decreases were driven by lower net revenues from the Company's products for STAR WARS and MARVEL which benefited from a broader slate of entertainment releases in prior years without a more recent release entertainment release to support revenue in the first nine months of 2024. Additionally, revenue in the first nine months of 2023 was higher due to the Company's products for INDIANA JONES supported by the June 2023 theatrical release of Indiana Jones and the Dial of Destiny.
PORTFOLIO BRANDS: Portfolio Brands net revenues decreased $73.8 million, or 20%, in the first nine months of 2024 compared to the first nine months of 2023. Lower net revenues from POWER RANGERS, BABY ALIVE, and PJ MASKS products were partially offset by revenue contributions from FURBY products following the Company's reintroduction of the brand and refreshed product line during the second quarter of 2023 and licensing revenue for MY LITTLE PONY trading cards.
NON-HASBRO BRANDED FILM & TV: Net revenues from Non-Hasbro Branded Film & TV decreased $397.2 million in the first nine months of 2024 compared to the first nine months of 2023. Net revenues from the Company's Non-Hasbro-branded Film and TV portfolio were associated with the eOne Film and TV business sold during the fourth quarter of 2023. Effective in the first quarter of 2024, the Company moved the remaining Non-Hasbro Branded Film & TV brands into Portfolio Brands to align with the Company's Brand Strategy. For comparability, net revenues for nine months ended October 1, 2023, has been reclassified to reflect the movement, resulting in a change of $1.2 million.
OPERATING COSTS AND EXPENSES
Cost of sales - Cost of sales for the first nine months of 2024 was $820.8 million, or 27.1% of net revenues, compared to $1,132.0 million, or 30.5% of net revenues, for the first nine months of 2023. The Cost of sales decrease in dollars and as a percent of net revenues was driven primarily by lower sales volumes, supply chain productivity, and cost savings initiatives, and a non-recurring $26.7 million benefit related to a historical over-accrual of vendor commitment liabilities as discussed in Note 1 to the consolidated financial statements.
Program cost amortization - Program cost amortization decreased to $24.5 million, or 0.8% of net revenues, for the first nine months of 2024 from $325.3 million, or 8.8% of net revenues, for the first nine months of 2023. The decrease in dollars and as a percent of net revenues during the first nine months of 2024 was driven by the impact of the sale of the eOne Film and TV business during the fourth quarter of 2023 as prior year Program costs were primarily associated with the eOne Film and TV business.
Royalties - Royalty expense for the first nine months of 2024 decreased to $204.2 million, or 6.7% of net revenues, compared to $295.8 million, or 8.0% of net revenues, for the first nine months of 2023. The decrease in Royalty expense in dollars and as a percent of net revenues during the first nine months of 2024 directly reflects the impact of the sale of the eOne Film and TV business.
Product development - Product development expense for the first nine months of 2024 was $212.2 million, or 7.0% of net revenues, compared to $232.4 million, or 6.3% of net revenues, for the first nine months of 2023. The decrease in Product development expense during the first nine months of 2024 was driven by cost savings initiatives from cost savings initiatives, along with phasing of product releases.
Advertising - Advertising expense for the first nine months of 2024 was $213.8 million, or 7.0% of net revenues, compared to $249.8 million, or 6.7% of net revenues, for the first nine months of 2023. The Advertising expense decrease during the first nine months of 2024 was primarily driven by the sale of the eOne Film and TV business, along with declines in the advertising expense in the Consumer Products segment due to lower net revenues.
Amortization of intangibles - Amortization of intangible assets decreased to $51.2 million, or 1.7% of net revenues, for the first nine months of 2024, compared to $65.1 million, or 1.8% of net revenues, for the first nine months of 2023. The decrease in 2024 reflects lower definite lived intangible assets due to the sale of the eOne Film and TV business and impairments taken in 2023. See further detail of impairments taken in 2023 in Note 6 of the 2023 Annual Report.
Impairment of goodwill - There were no goodwill impairment charges during the first nine months of 2024. During the first nine months of 2023, the Company recorded $231.2 million of goodwill impairment charges associated with goodwill assigned to the Company's Film and TV reporting unit. See further details in the 2023 Annual Report.
Selling, distribution and administration - Selling, distribution and administration expenses decreased to $852.6 million, or 28.1% of net revenues for the first nine months of 2024, from $1,050.0 million, or 28.3% of net revenues, for the first nine months of 2023. The decrease in Selling, distribution and administration expenses in dollars and as a percent of net revenues during the first nine months of 2024 primarily reflects lower administrative expenses due to cost savings from cost savings initiatives, a prior year intangible asset impairment charge of $65.0 million related to the Company's eOne trademark intangible asset, along with a non-recurring stock-compensation adjustment of $18.1 million recorded during the first quarter of 2024, partially offset by a non-recurring $31.1 million expense related to historical environmental exposures as discussed in Note 1 to the consolidated financial statements.
Operating Profit (Loss) - The operating profit for the first nine months of 2024 was $630.2 million, or 20.8% of net revenues, compared to an operating loss of $(340.2) million, or 9.2% of net revenues, for the first nine months of 2023 driven by the factors discussed above.
NON-OPERATING EXPENSE (INCOME)
Interest expense - Interest expense for the first nine months of 2024 totaled $127.7 million compared to $140.0 million in the first nine months of 2023. The decrease in Interest expense for the first nine months of 2024 primarily reflects lower average outstanding borrowings in the first nine months of 2024 as compared to first nine months of 2023 due to the assumption of the production financing borrowings by Lionsgate as part of the eOne Film and TV business and due to the retirement of the Company's variable-rate Five-Year term loan using proceeds from the sale of the eOne Film and TV business, both occurring during the fourth quarter of 2023, partially offset by the issuance of the 2034 Notes (see Liquidity and Capital Resources discussion below for further information including description of the 2034 Notes).
Interest income - Interest income was $36.0 million for the first nine months of 2024, compared to $15.6 million in the first nine months of 2023. Higher Interest income in 2024 primarily reflects higher average interest rates in 2024 compared to 2023, along with the Company's investment in short-term treasury bills in connection with the issuance of the 2034 Notes (see Liquidity and Capital Resources discussion below for further information including description of the 2034 Notes).
Other income, net - Other income, net was $15.7 million for the first nine months of 2024, compared to Other income, net of $0.7 million in the first nine months of 2023. The change in Other income, net during 2024 was driven primarily by an increase in foreign currency exchange gains the first nine months of 2024 as compared to the first nine months of 2023.
INCOME TAXES
Income tax expense totaled $133.3 million on pre-tax income of $554.2 million in the first nine months of 2024 compared to an income tax benefit of $36.9 million on pre-tax loss of $463.9 million in the first nine months of 2023. Both periods were impacted by discrete tax events including the accrual of potential interest and penalties on uncertain tax positions. During the first nine months of 2024, the Company incurred a $24.4 million unfavorable adjustment to the 2023 Loss on Sale of the Film & TV reporting unit with no corresponding tax benefit. The first nine months of 2023 includes an impairment of goodwill related to the Film & TV reporting unit of $231.2 million with no tax benefit. During the first nine months of 2024, exclusive of the Loss on Sale adjustment, the Company recorded net discrete tax expense of $1.8 million compared to a net benefit, exclusive of the goodwill impairment, of $113.3 million in the first nine months of 2023.
The unfavorable net discrete tax expense for the first nine months of 2024 is primarily associated with stock-based compensation offset by the release of various uncertain tax positions. The net discrete tax benefits recorded in the first nine months of 2023 is primarily associated with a tax benefit on the impairment of trade names in the Entertainment segment in the second quarter and the loss on assets held for sale of $473.0 million, recorded in the third quarter. Absent discrete items, the tax rates for the first nine months of 2024 and 2023 were 22.7% and 25.0%, respectively. The decrease in the base rate of 22.7% for the first nine months of 2024, relative to the first nine months of 2023, is primarily due to the mix of jurisdictions where the Company earned its profits coupled with a pre-tax loss in the first nine months of 2023.
SEGMENT RESULTS
The following table presents net external revenues and operating profit (loss) for the Company's reportable segments for the nine months ended September 29, 2024 and October 1, 2023:
| | | | | | | | | | | | | | | | | |
| Nine Months Ended |
| September 29,
2024 | | October 1,
2023 | | %
Change |
| Net revenues: | | | | | |
| Consumer Products | $ | 1,797.6 | | | $ | 2,132.5 | | | (16) | % |
| Wizards of the Coast and Digital Gaming | 1,172.3 | | | 1,094.4 | | | 7 | % |
| Entertainment | 64.0 | | | 487.5 | | | (87) | % |
| Total net revenues | $ | 3,033.9 | | | $ | 3,714.4 | | | (18) | % |
| | | | | |
| Operating profit (loss): | | | | | |
| Consumer Products | $ | 64.8 | | | $ | 61.5 | | | 5 | % |
| Wizards of the Coast and Digital Gaming | 551.1 | | | 422.5 | | | 30 | % |
| Entertainment | 14.6 | | | (801.4) | | | (102) | % |
| Corporate and Other | (0.3) | | | (22.8) | | | (99) | % |
| Total Operating profit (loss) | $ | 630.2 | | | $ | (340.2) | | | (285) | % |
Consumer Products Segment
The following table presents the Consumer Products segment net revenues by major geographic region for the nine months ended September 29, 2024 and October 1, 2023:
| | | | | | | | | | | | | | | | | |
| Nine Months Ended |
| September 29,
2024 | | October 1,
2023 | | %
Change |
| North America | $ | 1,072.0 | | | $ | 1,234.7 | | | (13) | % |
| Europe | 341.8 | | | 472.2 | | | (28) | % |
| Asia Pacific | 193.3 | | | 191.5 | | | 1 | % |
| Latin America | 190.5 | | | 234.1 | | | (19) | % |
| Net revenues | $ | 1,797.6 | | | $ | 2,132.5 | | | (16) | % |
The Consumer Products segment net revenues decreased 16% to $1,797.6 million for the first nine months of 2024 compared to $2,132.5 million for the first nine months of 2023 primarily driven by broader industry trends, exited businesses, including out-licensing certain brands, shifts in product mix, and reduced closeout sales as a result of last year's inventory clean up initiatives. The net revenue decrease primarily reflects lower net revenues from NERF, TRANSFORMERS, STAR WARS and MARVEL products. Net revenues from TRANSFORMERS products in the first nine months of 2023 were supported by the June 2023 theatrical release of TRANSFORMERS: Rise of the Beasts. The net revenue decrease was also driven by lower net revenues from the Company's products for STAR WARS and MARVEL which benefited from a slate of entertainment releases in prior years without a more recent release entertainment release to support revenue in the first nine months of 2024. These revenue decreases were partially offset by revenue contributions from FURBY products following the Company's reintroduction of the brand and refreshed product line during the second quarter of 2023 and licensing revenue for MY LITTLE PONY trading cards.
Consumer Products segment operating profit for the first nine months of 2024 was $64.8 million or 3.6% of segment net revenues, compared to a segment operating profit of $61.5 million or 2.9% of segment net revenues, for the first nine months of 2023. The increase in operating profit in the first nine months of 2024 was driven by favorable licensing product mix, supply chain productivity, and cost savings realized from cost savings initiatives, partially offset by the lower sale volumes contributions.
Wizards of the Coast and Digital Gaming Segment
The following table presents Wizards of the Coast and Digital Gaming segment net revenues by category for the nine months ended September 29, 2024 and October 1, 2023:
| | | | | | | | | | | | | | | | | |
| Nine Months Ended |
| September 29,
2024 | | October 1,
2023 | | %
Change |
| Tabletop Gaming | $ | 832.6 | | | $ | 806.9 | | | 3 | % |
| Digital and Licensed Gaming | 339.7 | | | 287.5 | | | 18 | % |
| Net revenues | $ | 1,172.3 | | | $ | 1,094.4 | | | 7 | % |
Wizards of the Coast and Digital Gaming segment net revenues increased 7% in the first nine months of 2024 to $1,172.3 million from $1,094.4 million in the first nine months of 2023. The net revenue increase in the Wizards of the Coast and Digital Gaming segment during the first nine months of 2024 was primarily attributable to revenue contributions from higher digital licensing of Baldur's Gate 3, the DUNGEONS & DRAGONS-based role-playing video game released during the third quarter 2023, and MONOPOLY GO!. Tabletop Gaming revenue increased 3% behind growth in MAGIC: THE GATHERING primarily due to strong demand for Bloomburrow, Duskmourn, and Modern Horizons 3.
Wizards of the Coast and Digital Gaming segment operating profit was $551.1 million, or 47.0% of segment net revenues for the first nine months of 2024, compared to operating profit of $422.5 million, or 38.6% of segment net revenues, for the first nine months of 2023. The operating profit increase during the first nine months of 2024 was driven by increased net revenues, contributions from higher digital licensing revenue mix, lower royalty expense, and cost savings initiatives.
Entertainment Segment
The following table presents Entertainment segment net revenues by category for the nine months ended September 29, 2024 and October 1, 2023:
| | | | | | | | | | | | | | | | | |
| Nine Months Ended |
| September 29,
2024 | | October 1,
2023 | | %
Change |
| Film and TV | $ | 3.4 | | | $ | 423.8 | | | (99) | % |
| Family Brands | 60.6 | | | 63.7 | | | (5) | % |
| Net revenues | $ | 64.0 | | | $ | 487.5 | | | (87) | % |
Entertainment segment net revenues decreased 87% to $64.0 million for the first nine months of 2024, compared to $487.5 million for the first nine months of 2023. The net revenue decrease in the Entertainment segment during the first nine months of 2024 was driven by lower net revenues as a result of the sale of the eOne Film and TV business during the fourth quarter of 2023.
Entertainment segment operating profit was $14.6 million, or 23% of segment net revenues for the first nine months of 2024, compared to an operating loss of $801.4 million, or 164% of segment net revenues for the first nine months of 2023. The increase in Entertainment segment operating results during the first nine months of 2024 was driven by a goodwill impairment charge of $231.2 million and intangible asset impairment charges of $65.0 million recorded during the first nine months of 2023, associated with the impairment review of the Company's Film and TV reporting unit. In the third quarter of 2023, the Entertainment segment recognized a loss on assets held for sale of $473.0 million that related to the sale of the non-core eOne Film and TV Business.
Corporate and Other
Corporate and Other operating loss was $0.3 million for the first nine months of 2024 compared to an operating loss of $22.8 million for the first nine months of 2023. The decrease in operating loss in the first nine months of 2024 as compared to the first nine months of 2023 reflects cost savings realized from cost savings initiatives and a benefit from an non-recurring adjustment for stock compensation expense reversal recorded in the first quarter of 2024, partially offset by the net impact of the two prior period non-recurring adjustments recorded during the second quarter of 2024. Refer to Note 1 to the consolidated financial statements for further information on these non-recurring adjustments.
OTHER INFORMATION
Commitments and Contingencies
The Company enters into purchase orders with vendors and other parties in the ordinary course of business. Refer to Item 7 of our 2023 Annual Report for additional information regarding the Company’s cash obligations and commitments as of the end of fiscal year 2023. Additionally, refer to Note 14 to the consolidated financial statements for a discussion of the Company’s commitments and contingencies. Contractual obligations and commercial commitments, as detailed in the Company's 2023 Form 10-K, did not materially change outside of certain payments made in the normal course of business and as otherwise set forth in this report.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically generated a significant amount of cash from operations. The Company primarily funds its operations and liquidity needs through cash on hand and from cash flows from operations, and when needed, borrowings under its commercial paper program and available lines of credit.
The Company believes that the funds available to it, including cash expected to be generated from operations, funds available through its commercial paper program or its available lines of credit, are adequate to meet its working capital needs for the next twelve months. The Company may also issue debt or equity securities from time to time, to provide additional sources of liquidity when pursuing opportunities to enhance our long-term competitive position, while maintaining a strong balance sheet.
As of September 29, 2024, the Company's cash and cash equivalents totaled $696.1 million, and the Company's short-term investments totaled $489.3 million. The majority of the Company’s cash and cash equivalents held outside of the United States as of September 29, 2024, are denominated in the U.S. dollar.
Under the Company’s commercial paper program, at the request of the Company and subject to market conditions, the Company may issue notes from time to time up to an aggregate principal amount outstanding at any given time of $1.0 billion. The Company intends to use the commercial paper program as its primary short-term borrowing facility. As of September 29, 2024, the Company had no outstanding borrowings related to the commercial paper program.
The Company’s revolving credit facility with Bank of America, provides the Company with commitments having a maximum aggregate principal amount of $1.25 billion. The revolving credit facility also provides for a potential additional incremental commitment increase of up to $500.0 million subject to agreement of the lenders. The Company's revolving credit facility contains certain financial covenants setting forth leverage and coverage requirements, and certain other limitations typical of an investment grade facility, including with respect to liens, mergers and incurrence of indebtedness. The Company was in compliance with all covenants as of September 29, 2024. The Company had no borrowings outstanding under its revolving credit facility as of September 29, 2024. However, letters of credit outstanding under this facility as of September 29, 2024 were approximately $4.0 million. Amounts available and unused under the revolving credit facility at September 29, 2024 were approximately $1.2 billion, inclusive of borrowings under the Company’s commercial paper program. The Company also has other uncommitted lines from various banks, of which approximately $7.8 million was utilized as of September 29, 2024. Of the amount utilized under, or supported by, the uncommitted lines, the full $7.8 million represented letters of credit.
The Company has principal amounts of long-term debt as of September 29, 2024 of $4.0 billion, due at varying times from 2024 through 2044. Of the total principal amount of long-term debt, $500.0 million is current as of September 29, 2024 which represents the Company's 3% fixed-rate notes due November 2024 (the "2024 Notes"). See Note 8 to the Company’s consolidated financial statements for additional information on long-term debt and long-term debt interest repayment, respectively.
In May 2024, the Company issued an aggregate of $500.0 million of senior unsecured debt securities that bears a fixed interest of 6.05% due 2034 (the "2034 Notes"). In connection with the issuance of the 2034 Notes, the 2034 Notes were issued with an original issuance discount of $1.4 million and capitalized $5.3 million of debt issuance costs. The original issuance discount and debt issuance costs will be amortized over the term of the 2034 Notes. It is anticipated that proceeds from the 2034 Notes, along with existing cash available, will be utilized to repay the 2024 Notes. As of September 29, 2024, the Company had invested the proceeds from the 2034 Notes in short-term investments.
From time to time, the Company or its affiliates may seek to retire or purchase outstanding debt through cash purchases, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.
The Company has a supplier finance program which provides participating suppliers the option of receiving payment in advance of an invoice due date, to be paid by certain administering banks, on the basis of invoices that the Company has confirmed as valid and approved. The Company’s obligation is to make payment in the invoice amount negotiated with participating suppliers, to the administering banks on the invoice due date. The Company’s suppliers are not required to participate in the supplier finance program. The early payment transactions between the Company’s supplier and the administering bank are subject to an agreement between those parties, and the Company does not participate in any financial aspect of the agreements between the Company’s suppliers and the administering banks. The Company has not pledged any assets to the administering bank under the supplier financing program. The Company or the administering bank may terminate the agreement upon at least 30 days’ written notice.
The amount of obligations confirmed under the supplier finance program that remain unpaid by the Company were $118.7 million, $105.7 million, and $43.3 million as of September 29, 2024, October 1, 2023 and December 31, 2023, respectively. These obligations are presented within Accounts payable in the Company's Consolidated Balance Sheets. The activity related to this program is reflected within the operating activities section of the Consolidated Statements of Cash Flows.
Cash Flow
The following table summarizes the changes in the Consolidated Statement of Cash Flows, expressed in millions of dollars, for the nine months ended September 29, 2024 and October 1, 2023.
| | | | | | | | | | | |
| Nine Months Ended |
| September 29,
2024 | | October 1,
2023 |
| Net cash provided by (utilized for): | | | |
| Operating activities | $ | 587.6 | | | $ | 334.9 | |
| Investing activities | (635.4) | | | (162.6) | |
| Financing activities | 190.8 | | | (418.0) | |
Net cash provided by Operating activities in the first nine months of 2024 was $587.6 million compared to $334.9 million in the first nine months of 2023. The $252.7 million increase in net cash provided by Operating activities after adjusting for non-cash items, was primarily attributable to improved net income in the first nine months of 2024 compared to first nine months of 2023, and working capital benefits, primarily as a result of the sale of the eOne Film and TV business.
Net cash utilized for Investing activities was $635.4 million in the first nine months of 2024 compared to net cash utilized for Investing activities of $162.6 million in the first nine months of 2023. Additions to property, plant and equipment were $146.2 million in the first nine months of 2024 compared to $160.4 million in the first nine months of 2023 and purchase of Short-term Investments of $571.0 million in the first nine months of 2024 primarily from the proceeds of the 2034 Notes compared to the prior year with no similar activity.
Net cash provided by Financing activities was $190.8 million in the first nine months of 2024 compared to net cash utilized of $418.0 million in the first nine months of 2023. Financing activities in the first nine months of 2024 primarily include $500.0 million of proceeds from issuance of the 2034 Notes, dividends paid of $292.2 million and $13.0 million of payments related to tax withholdings for stock compensation coinciding with equity award vesting activity. Financing activities in the first nine months of 2023 include $290.9 million of dividends paid, $60.0 million of principal amortization payments toward the Company's Five-Year Tranche loan, which was retired during the fourth quarter of 2023 using the proceeds received from the sale of eOne Film and TV, as well as drawdowns of $117.9 million and repayments of $162.0 million related to production financing loans, all of which were assumed by Lionsgate effective upon the closing of the sale of the eOne Film and TV business in the fourth quarter of 2023, and $15.7 million of payments related to tax withholdings for stock compensation coinciding with equity award vesting activity.
CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES
The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. As such, management is required to make certain estimates, judgments and assumptions that it believes are reasonable based on the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the periods presented. The significant accounting policies which management believes are the most critical to aid in fully understanding and evaluating the Company's reported financial results include recoverability of goodwill and intangible assets and income taxes. These critical accounting policies are detailed in the Company's 2023 Form 10-K.
FINANCIAL RISK MANAGEMENT
The Company is exposed to market risks attributable to fluctuations in foreign currency exchange rates primarily as the result of sourcing products priced in U.S. dollars, Hong Kong dollars and Euros while marketing and selling those products in more than twenty currencies. Results of operations may be affected primarily by changes in the value of the U.S. dollar, Euro, British pound sterling, Canadian dollar, Japanese Yen, Brazilian real and Mexican peso and, to a lesser extent, other currencies in Latin America and Asia Pacific countries.
To manage this exposure, the Company has hedged a portion of its forecasted foreign currency transactions using foreign exchange forward contracts and foreign exchange option contracts. The Company is also exposed to foreign currency risk with respect to its net cash and cash equivalents or short-term borrowing positions in currencies other than the U.S. dollar. The Company believes, however, that the on-going risk on the net exposure should not be material to its financial condition. In addition, the Company's revenues and costs have been, and will likely continue to be, affected by changes in foreign currency rates. A significant change in foreign exchange rates can materially impact the Company's revenues and earnings due to translation of foreign-denominated revenues and expenses. The Company does not hedge against translation impacts of foreign exchange. From time to time, affiliates of the Company may make or receive intercompany loans in currencies other than their functional currency. The Company manages this exposure at the time the loan is made by using foreign exchange contracts.
The Company reflects derivatives at their fair value as an asset or liability on the Consolidated Balance Sheets. The Company does not speculate in foreign currency exchange contracts. See Note 12 to the Company’s consolidated financial statements for further details on the Company's derivatives.
As of September 29, 2024, the Company had fixed-rate debt of $4.0 billion. The Company may from time to time assess interest rate swaps related to its outstanding debt. The Company did not have any outstanding swaps as of September 29, 2024, October 1, 2023, or December 31, 2023.
INFLATION
The impact of inflation on the Company's business operations was significant during the first nine months of 2024 and throughout 2023. The Company monitors the impact of inflation to its business operations on an ongoing basis and may need to implement actions such as price adjustments to mitigate the impact of changes to the rate of inflation in future periods. However, future volatility of general price inflation could affect consumer purchases of our products and spending on entertainment. Additionally, the impact of inflation on costs and availability of materials, costs for shipping and warehousing and other operational overhead, could adversely affect the Company's financial results.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The information required by this item is included in Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" and is incorporated herein by reference.
Item 4. Controls and Procedures.
Evaluation of disclosure controls and procedures
The Company maintains disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. The Company carried out an evaluation, under
the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of September 29, 2024. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective.
Changes in internal control over financial reporting
There were no changes in the Company's internal control over financial reporting, as defined in Rule 13a-15(f) promulgated under the Exchange Act, during the quarter ended September 29, 2024 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is currently party to certain legal proceedings, none of which it believes to be material to its business or financial condition.
Item 1A. Risk Factors.
In connection with information set forth in this Quarterly Report on Form 10-Q, the risk factors discussed under Item 1A. Risk Factors, in Part I of our 2023 Form 10-K and in our subsequent filings, including in this filing, should be considered. The risks set forth in our 2023 Form 10-K and in our subsequent filings, including in this filing, could materially and adversely affect our business, financial condition, and results of operations. There are no material changes from the risk factors as previously disclosed in our 2023 Form 10-K, in any of our subsequently filed reports or as otherwise set forth in this Quarterly Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
In May 2018, the Company announced that its Board of Directors authorized the repurchase of an additional $500 million of common stock, its most recent share repurchase authorization. Purchases of the Company's common stock may be made from time to time, subject to market conditions. These shares may be repurchased in the open market or through privately negotiated transactions. The Company has no obligation to repurchase shares under this authorization and there is no expiration date for this repurchase authorization. The timing, actual number, and value of shares that are repurchased will depend on a number of factors, including the price of the Company's stock and the Company’s generation of, and uses for, cash.
There were no repurchases of the Company’s Common Stock during the nine months ended September 29, 2024. At September 29, 2024, Hasbro had $241.6 million remaining available under its share repurchase authorization.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
During the nine months ended September 29, 2024, none of our officers or directors or a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) and (c) of Regulation S-K.
Item 6. Exhibits [NTD: Legal to review]
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| 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document. |
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* Furnished herewith
** Indicates management contract or compensatory plan, contract or arrangement
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| HASBRO, INC. |
| (Registrant) |
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| Date: October 31, 2024 | By: /s/ Gina Goetter |
| | Gina Goetter |
| Chief Financial Officer and Chief Operating Officer
(Duly Authorized Officer and
Principal Financial Officer) |
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